How was the Starbucks Company was Founded and by Who?
The essence of Starbucks is about roasting the highest quality whole bean coffee, but this is not the whole story. According to Starbucks, people today believe in two things: making a contribution to the world and drinking a cup of coffee with friends and family. This has been true ever since the company was founded in 1971 and remains so today. The first Starbucks cafe was located in the famous Pike Place Market district in Seattle, Washington, and today the chain has expanded to thousands of coffee houses around the world. The offerings at Starbucks were similar to those existing today – the premium fresh-roasted whole bean coffee. The name of Starbucks was inspired by the character in Moby Dick and its passion for the marine traditions related to the coffee merchants.
The founders of the Starbucks Company were school teachers Jerry Baldwin and Zev Siegl along with writer Gordon Bowker. They sold the company to former employee Howard Schultz in 1987, who had opened his own chain of coffee houses called Il Giornale. He was inspired by the coffee stores in Italy that he discovered during a trip in 1983. The major aspect of his interest was in the ability of the Italian coffee stores to bring more romance into the lives of people. As a result, it has created an outstanding coffee experience that guides Starbucks coffee with the vision of taking Italian traditions and bringing them to the United States. Thus, the goal for the Starbucks Company was to set it apart from all other coffee houses in the United States. Schultz, who remains chairman and CEO today, believed this could be achieved by taking advantage of the celebrated whole bean coffee of the highest quality, the establishing a rich tradition and the feeling of connection.
Another of Schutz’s ideas was for the target customer to expect more than coffee. It means going beyond just serving Italian coffee, and instead creating a complete gratifying coffeehouse experience. In addition, Schultz decided to sell a number of premium-selected teas of the highest quality, including carefully chosen pastries and sandwiches. The aim was to please the most sophisticated tastes of coffee drinkers. At the same time, Schultz’s Starbucks cafes contained the right style of soothing music to create an appeal for the coffee. Consequently, it has become typical to see patrons come to the Starbucks in order to meet with their friends, chat and even to work. Ultimately, Schultz created a place for the locals to gather in the neighborhood. Everything that the Starbucks Company dealt with was made with the sense of humanity and commitment, including the top quality of its coffee. Thus, Schultz managed to engage his target customers within the coffee community, which was also the grounded on corporate responsibility.
The worldwide headquarters of the Starbucks Company is in Seattle, Washington.
What is the Starbucks Company’s Mission Statement?
The mission statement of the company is to inspire people and nurture their human spirit as well as to combine people, coffee and neighborhood at the same time. However, the mission can only be achieved if it incorporates certain beliefs that are considered by the business partners and target customers. The aim is to deliver coffee of the highest quality based on the following values. First, it is important to create a warm, welcoming atmosphere at the coffee houses that provide a feeling of belonging for every target customer. Second, it is essential to run the business by inspiring the target customers to challenge the status quo and consider new prospects of further development at Starbucks. Third, every target customer must be served with a sense of respect, dignity, integrity, transparency, and integrity. Finally, it is imperative to deliver the coffee and food items in all the best possible ways. Everything should be made to hold the company representatives in the position of being responsible for their results. Thus, the Starbucks Company is performance oriented with respect to the sense of humanity across its coffee houses all over the world.
What are the CEO’s Qualifications for the Position? Critique his/her Performance to Date
As it was mentioned previously, the CEO of the Starbucks Company is Howard Schultz, who is also its chairman who “started the company with a cup of coffee”. The major qualification of Schultz is his zest for roasting coffee of the utmost excellence and being passionate about it. One of his values is the ability to incorporate the coffee culture all over the world. Another qualification of the CEO is operations marketing, as his position was Director of Operations and Marketing when he first worked at Starbucks in 1982. It is also important to acknowledge that in order to bring the Italian romance and outstanding experience for drinking coffee, he traveled to Italy to understand and transfer the established Italian coffee traditions to the United States. Schultz indeed has a vision for the human connection, including the ways to foster community growth. As a result, the Starbucks Company today offers premium coffee of the highest quality, which is served in 21,000 stores across 66 countries.
The purpose of Starbucks Company is to make a difference for its target customers. It is all meant to bring kindness and illustrate dignity and respect of the chief executive officer. Schultz has established the essence of the Starbucks coffee culture. His approach to business is highly ethical and thus trusted all over the world. One example is the fact that he offers his employees all-inclusive health care coverage, which applies to both part-time and full-time employees. In fact, the Starbucks was one of the first companies in the food services industry to provide this. Since then Schultz has remained committed to looking out for the health of Starbucks employees in spite of the growing health care expenditures over the past twenty years. Another important aspect when considering the qualifications of Schultz in terms of his position in the Starbucks Company is offering equity to his business partners and employees. It is distributed in the form of stocks that are known as the Bean Stocks. In other words, it qualifies Schultz as a thoughtful CEO who makes a significant financial investment into his employees and business partners. Thus, he deserved the existing trust and respect across the entire community of Starbucks, which makes him successful in the coffee business.
Ever since 2000 when Schultz was named chairman and CEO, he has managed to transform the company and its corporate culture into a profitable and self-sustaining organization. In fact, it is one of the few coffee houses on the planet that has renewed its focus on the coffee heritage and enhanced it with contemporary innovations and established customer service experiences. Another qualification that makes Schultz exceptional is his leadership abilities. For example, he has inspired many great leaders both within the company and in the international business industry as a whole. The idea was to support the local communities with the spirit of coffee. Such efforts were also added with his initiative to employ a great number of the United States military veterans as well as their spouses. In addition, Schultz created an opportunity for his employees to study at the Starbucks Company’s school and Starbucks College. Everything is controlled by the Starbucks Achievement Plan to ensure successful employment at the Starbucks Company.
Thus, an incredible qualification of Schultz is his ability to maintain the same approach to grow, which is to combine people, coffee and neighborhood – everything at the same time as the soul of the organization. Overall, for the many reasons outlined earlier, Schultz has been recognized as a leader with a true passion for people made with coffee and many efforts to empower the local communities. He was also named the Businessperson of the Year in 2011 for his financial achievements while leading the Starbucks Company to success. At the same time, he has been recognized for the creation of many jobs in the United States with the Distinguished Leadership Award from Northwestern University’s Kellogg School of Management. In parallel, Schultz has received the Horatio Alger Award for his ability to manage adversity on the road to business excellence. The explicit qualifications of Schultz are further supported with the Rev. Theodore M. Hesburgh Award for Business Ethics that was issued by the University of Notre Dame’s Mendoza College of Business. Schultz has also been honored with the Botwinick Prize in Business Ethics from Columbia Business School along with the John Wooden Global Leadership Award from the UCLA Anderson School of Management. Furthermore, Howard Schultz is on Time Magazine‘s 200 list of the most influential entrepreneurs in the world. At the same time, Schultz is the best-selling author of several books including For Love of Country: What Our Veterans Can Teach Us About Citizenship, Heroism, and Sacrifice (2014), Onward: How Starbucks Fought for Its Life without Losing Its Soul (2012), and Pour Your Heart Into It (1997). Schultz is also an investor in the venture capital group known as the Maveron LLC. Regarding his past professional experience, Schultz was involved in sales and marketing of the Xerox Corporation for three years and held the position of Vice President and General Manager of Hammarplast U.S.A. at the Swedish Housewares Company.
Yet another qualification of Schultz is in his ability to lead people, which he himself gained from the leadership guru Warren G. Bennis over the course of thirty years. Overall, takes a great deal of competency to understand how to lead and manage a workforce of 300,000 people. In fact, the model to manage employees that is chosen by Schultz is known as Servant Leadership. The most influential leaders in the world use it, and it requires a high degree of responsibility and desire to learn new tactics in order to help people all over the world. The idea of this model is to find a compromise that all the involved parties can agree to. One of the important insights from the past is that he was the first person in his family with a college degree. Schultz got his professional start with Xerox Corporation. Overall, he learned the art of leading and managing people through the years of hard work with the target customers. He understands that the major interest of his actions should be to encourage others as well as to determine their initial intentions and provide them with what they want. Allowing his part-time employees to have access to stock options, health care and free education illustrates this commitment.
The most responsible heads of the largest organizations in the world are those who exhibit these behaviors. As a result, such actions are well-known in the Starbucks community, which makes the people oriented on the American way of living. Today, creating the common good could be perceived from the thoughts and actions of the servant leaders such as Howard Schultz. In fact, while the vast majority of people who are chosen for a high position such as company executive usually make great promises, most fail to deliver them. Schultz is the leader and executive who strives to control himself and others in the way to actually achieve the stated goals and deliver people all the promised business solutions. Indeed, the way of managing the company closely relates to his words that Starbucks is not in the business of filling bellies but about filing souls. For this reason, Starbucks is on the Forbes list of most innovative companies with statistics of 20,000 stores in 66 countries all over the world. It also relates to the market capitalization value of around $36 billion and a market share of $59 billion with the continued growth.
Which Generic Strategy does the Company Implement?
The generic strategy used by Starbucks Company could be illustrated based on the Starbucks Generic Value Chain, which consists of the primary and support activities addressed below:
The primary activities could be perceived through the set of margins such as the inbound logistics, operations, outbound logistics, services, marketing and sales provided below:
- Inbound logistics involves obtaining coffee from the assorted of coffee beans manufacturers. It is very important to have favorable relationships with these companies since it fosters a well-established and effective supply chain management system.
- Operations refer to the business dealings of the company across sixty countries and the Starbucks stores that operate on the basis of the already licensed stores in these countries.
- Outbound logistics refers to the product mix that is offered to the target customers at the Starbucks stores and the spaces rented at bookstores, hotels and large retailers. It also corresponds to the payment that considers the source over the point of sale, and is also related to mobile payments and prepaid Starbucks Cards.
- Marketing and Sales refers to the conventional investment and marketing strategy development. It includes all the possible activities that are important for improving the business reputation by means of sharing information about the products and services of premium quality. It also corresponds to the outstanding customer service that defines the overall experience of the target customers and the Starbucks Company with its offers and stores all over the world.
- Service refers to the number of services provided by the Starbucks Company that are highly important to create and maintain its reputation. It also considers customer service delivered in the target market.
The support activities could be perceived through the set of margins such as the firm infrastructure, human resource management, technology development and procurement that are explained below in more detail.
- Firm Infrastructure refers to the perceptions of the store design, which should be pleasant for the target customers in order to create the conditions for a successful purchase. It also corresponds to the aspects of accounting and financing, including the legal regulations of the company.
- Human Resource Management refers to a number of benefits that are offered to the employees of the company. The idea is to empower them through the corporate culture of the Starbucks organization. As a result, it bring more comfort and creates a favorable atmosphere since the human capital is valued the most by the executive management of Starbucks.
- Technology development refers to the use of the innovative technologies that involve investing time, efforts and money into the new systems of convenience such as mobile applications. The purpose is to create the opportunity for the target customers to purchase products and services over their smartphones.
- Procurement refers to the company’s working procedures corresponding to a variety of products retrieved from the great number of suppliers. The goal is to establish trusted relations and maintain them to guarantee a systematic supply of goods.
Overall, the Generic Strategy of the Starbucks Company is perceived with respect to the competitive advantage and competitive scope. The major emphasis is made on the differentiation, cost of leadership and overall focus of the company on the anticipated business and marketing strategies. In particular, the cost of leadership relates to the need to reduce costs in the aspects of the business operations that are planned in advance. It is important to control the profit margins with respect to the exploration of the needs of the target customers. It also includes product development, advertising, and customer service. At the same time, the means of differentiation corresponds to the establishment of the unique products and services not only by their nature but through the ways of positioning them. It consists of the ability of the company to deal with the market limitations, creating brand identity and maintaining customer loyalty, working effectively with the number of distributors and networking with business partners, taking advantage of the customer service and overall support of the Starbucks Company towards its target customers. Finally, the focus of the executives addresses the target marketing with regards to its geography, segmentation and product lines. As a result, the overall focus of the Starbucks Company is on its differentiation strategy and marketing capacity pursues a strong and competitive position in the target market.
The goal is to take advantage of employee potential and use it in order to perfect its reputation across the coffee industry. Such generic strategies of the Starbucks Company explain the constantly growing understanding of the needs of the target customers that result in the growth of profit margins, increased market cap and overall customer satisfaction. It also makes sense to apply the Porter’s Five Forces Analysis of the retail coffee industry on the basis of the Starbucks generic strategies. In particular, the threat of new entrants could be considered moderate, the threat of substitutes is perceived as high, the bargaining power of buyers is positioned as having moderate to low pressure, the bargaining power of suppliers is examined as having low to moderate pressure, and the intensity of competitive rivalry is high to moderate. Thus, by taking advantage of the generic strategies and the Porters Five Forces Analysis, it is possible to observe that the Starbucks Company operates in the target market based on the cumulative industry analysis. It directly relates to the deep understanding of the business strength in terms of its forces as well as the implications of profitability that exist in the retail coffee industry and remain moderate today.
What are the Main Products and / or Services of the Starbucks Company?
The major product lines of the Starbucks Company consist of coffee, pastries and light fare such as salads and sandwiches. In order to understand the perceptions of the coffee house, it is important to understand the lexical meaning of this word. The coffee shop is rooted in the French word café, representing an idea of coffee or a coffee house. There are similar characteristics in these three business representations with relation to coffee and tea. At the same time, the overall emphasis is on the variety of coffee and food items. However, the choice of meals is still different depending on the target customers. For example, some of them might prefer muffins; the others are more interested in pastries. Equally, the other categories of the target customers prefer sandwiches and salads. It is also important to acknowledge the cultural position of coffee houses all over the world. Overall, the coffeehouse industry is highly appreciated today. To a great extent, coffee houses are used to serve customers by offering them a place to socialize while drinking coffee and having something to eat. Simultaneously, some patrons prefer to get their work done at the coffee houses; the others are more interested in going there to communicate with friends. This holds true in every subsidiary of the Starbucks Company, irrespective of the pricing policies and availability of free spaces. For this reason, it makes sense to consider the trend for both inside the café, the outside sitting area, or as a place where customers can buy a sandwich and coffee to go.￼
It is important to consider the replication of the trend to take advantage of the Western urban form of business applied towards the coffee houses. At the same time, shopping malls are also built in a different way so as to satisfy the needs of patrons. In fact, millions of people visit shopping malls, including those with coffee houses, every day to drink some coffee and eat a meal. Overall, such a tendency embraces the increased demand for instant coffee serving fast food centers, which greatly increases their number all over the world. It is also essential to acknowledge that many people are easy-going and social and enjoy communicating over a cup of coffee in the public places such as the coffee houses or the shopping malls. For this reason, the Starbucks Company is extremely successful, especially among the younger demographics and the existing boom in the coffeehouse industry. As a result, the competing companies strive to offer new, innovative coffee tastes such as blends of different types of coffee. Fresh ideas in coffee result in the constantly growing popularity of the international coffee chains all over the globe. Starbucks is one of such business that owns a significant market share of the coffeehouse industry.
Due to the trends in the target coffeehouse market, the Starbucks Company has become the leader in roasting specialty coffee. In fact, gourmet coffee has even become a strong competitor in the beverage market, rivaling soft drinks and beer. For this reason, it is essential to have a much better channel of its distribution in the coffeehouse industry. The result will be increased sales and brand identity referring to the best bean retailers and roaster retailers such as Starbucks Company. In addition to the vast majority of the coffee tastes, coffeehouses such as Starbucks are offering more diversified snacks such as sweet rolls and even restaurant-quality food. Consequently, many coffeehouses have begun to transform into “coffee restaurants”.
According to recent statistics, around one third of the world’s population drinks coffee on daily basis. In Philippines, it has become a tradition to drink coffee while sharing stories. This way of communication continues until all the parties have finished telling and discussing their stories. In terms of complimentary items, milk has become an important addition for the perfect latte or cappuccino. At the same time, flavorings and spices are also considered important add-ons that unite the masses at the coffeehouses all over the world. Another element of interest is the flavor of coffee based on the differences in beans and their quality. The richest fragrances can be found in both Arabica and Robusta. However, it is highly important to manage the roasting process in a traditional manner, which results in the best possible taste. The ability of the Starbucks Company to combine these two substances in one makes it a perfect source of desiring more coffee. In addition, it is important to acknowledge that the roasting process should be followed strictly so as to manage all the stages of making coffee accordingly, from harvesting to drying and roasting. In many cases, the Starbucks Company is patient with the process of roasting since the beans that are harvested but not yet dried can keep their aroma for several years. Only after the roasting process has been completed do the coffee beans start exhibiting their flavor and thus diminish in their flavor strengths.
Finally, according to Starbucks, refer to the list of the Starbucks mix of products that are offered to customers today:
What is the Target Market (Business, Consumer, or both) and what are their Characteristics (Demographics, Psychographics, Geographic, Purchase Behavior)?
The target customers of the Starbucks Company comprise approximately thirty-five percent of the market cap in the United States. In fact, the comparison of statistics between coffeehouses and fast food restaurants illustrates that these portions are almost equal. Therefore, it is important to acknowledge that the Starbucks Company has a deep and thorough understanding of the needs and demands for coffee of the target customers based on their perceptions and a variety of tastes.
The primary target market of the Starbucks Company is both men and women from twenty-five to forty years old. Altogether, these demographics accounts for approximately fifty percent of all of Starbucks business. The executives tend to attract the target customers of this age group by using unique designs and offering consistent promotions. At the same time, all the products of the Starbucks Company have a strong positive impact its the constantly increasing revenues. It also refers to the growth of the need in the professional careers, including the emphasis on the social welfare. In fact, this particular target audience increases every year by around three percent.
The next category of the target customers is related to the young adults aged from eighteen to twenty four years old. This group accounts for around forty percent of the Starbucks sales every year. The overall positioning strategy is presented through the offers to the college students. The idea is to create a place for them to socialize and even complete their academic work. At the same time, the most important success factor is that the Starbucks Company uses the most contemporary information technologies in order to attract this target audience. Thus, young adults could cultivate an image of being “cool” while sitting in front of their laptops. This target audience increases every year by approximately five percent.
The other target customers of the Starbucks Company are children and teens. This audience includes those aged from thirteen to seventeen years old. However, it makes up only several percent of Starbucks’ total sales. Nevertheless, the vast majority of supplementary items for children are consumed by their parents. In order to emphasize the interest of this target audience, the company strives to add steamed milk, beverages with whipped cream and more sugar. In this way, this category of the target customers is more eager to consume Starbucks beverages. At the same time, the remaining target is family purchases and in particular coffee and food consumed by the parents. Furthermore, Starbucks coffee houses are a great place to communicate with the peers. It is also important to note that the company serves its beverages in small, medium and large sizes. This is important for the reason that it allows the company to become children-friendly and ultimately increase the percentage of this target audience, including its growth every year. Altogether, the specialty coffee drinks equal around seventy-five percent of the Starbucks sales and is mostly oriented towards families.
The characteristics of the target market could be illustrated on the basis of the segmentation of the target market by means of demographics. It relates to the age, ethnic background, gender, family life cycle and income. In parallel, the geographic segmentation narrows the target audience to the regions of the particular countries, including the size of the target market, its density, overall climate and the business locations such as freestanding coffeehouses, those located in discount retail stores, hotels and at college campuses.
The purchase behavior of the target audience could be perceived through the market positioning of the Starbucks Company. It helps the company to differentiate itself and provides it with a growing advantage compared to the other competing coffee houses in the industry. Hence, the strategy of positioning both coffee and snacks by the company is oriented entirely on the needs of the target customers and servicing them to the greatest extent possible. As a result, the Starbucks brand has become valuable in terms of providing advantages over other companies in target coffeehouse industry. It has been achieved due to the sustainable approach to the business and global customer satisfaction. To conclude, the strategies of the Starbucks Company have become increasingly successful over the last forty years. Consequently, the image of the company will remain on the same level or even higher as long as it continues to meet the needs of its target customers. The idea is to satisfy the demands of the most sophisticated customers, which is the greatest leading force of the Starbucks Company across the coffeehouse industry. Ultimately, the ability to pursue multiple innovative solutions in order to promote its products is also an excellent advantage over its competitors. Such emerging technological and innovative practices could also be applied in the areas of marketing, leadership, and financial side of the business. The idea is that the executives of the Starbucks Company have learned to listen to the feedback provided by its customers. They also listen to their hearts and overall intuition when considering the coffee and food offers. Finally, they constantly listen not only to the positive feedback but most importantly the negative input. Therefore, the executives rapidly respond to this feedback with business solutions that are favorable for all the categories of the target customers.
Prepare Graphs or Tables and Discuss Trend Analysis from 2010-2014 for Total Revenue, Net Income, Profit Margin, Earnings per Share, Return on Equity and Common Stock Price. Include the Company’s Income Statement and Balance Sheet in the Appendix
The trend analysis is presented using the tables below. However, in order to address the financial performance of the Starbucks Company, only the selected financial data will also be examined. The analysis will consider the dates from 2010 through 2014 including.
- One of the important aspects of interest is the total revenue of the company, which grew from approximately $11 million to around $17 million dollars over the course of four years. The growth dynamics of the company has seen an increase by about $1 million each year, which continues as of October 2015.
- The other important aspect of concern is net income, which also grew from slight less than $ 1 million in 2010 to more than $2 million at the end of 2014. The growth perception is also stable, based on the overall performance of the company in the target market.
- The profit margins have also grown with respect to the gross margins and operating margins. The gross margin remains favorably constant at around $60 million starting from 2010 through 2014. In parallel, the operating margin grew from $13 million in 2010 to almost $19 million in 2014.
- The earnings per share also increased from 2010 with basic $0.64 and diluted $0.62 to basic $1.38 and diluted $1.36 in 2014.
- The return on equity almost doubled from 2010 through 2014, which is approximately 28.1 in 2010 to 42.4 in 2014.
- The common stock price as of mid-October 2015 is almost $60 per share. The monthly range varies between $55 to $60 per share. The five-year range has been as low as $13.50 to over $60 per stock.
Refer to the selected financial data in the Appendix for the reference and more details.
Discuss in Depth the two Most Important Problems or Opportunities Facing the Company which are Identified in the Case.
This may be two Problems, two Opportunities, or one of each
Although the Starbucks Company has a winning position in the target coffeehouse industry, it could face several problems in the near future. For example, the company has expanded too rapidly and that could have a negative impact on the further growth of the Starbucks brand. As a result, there are three concerns that could have a negative impact on the position of the company in the target market. By pursuing such a global expansion strategy, the company could create a number of issues to becoming more profitable in 2016. These problems include the weakening of the coffee brand, the overload of choices for the target customers, including the complex supply chain management implications.
Weakening of the coffee brand refers to not being able to offer all the products for all the target customers. For example, in 2014 the company added the new items in the menus such as sandwiches, and additional beverages including the alcoholic drinks, tea and craft sodas. Today, the brand name of Starbucks correlates with coffee, which means that in the next five to ten years the changes to the menu could result in Starbucks losing its identity as a coffee shop. In this case, it is important to consider the success the brand has achieved so far by concentrating on offering a handful of items. In fact, there are no other brands that managed to achieve such a strong position in the coffeehouse industry, which continues to be successful. However, investors also perceive similar issues as the marketers and may not be willing to hold onto Starbucks stocks in the future, at least not as they did in the previous years. Nevertheless, the Starbucks brand has a reputation of the global coffee chain shop with a strong record of profits. In this case, it makes sense to consider the past history of brand development with respect to its growth tendencies and recessions, including the stage of inaction. Currently, there is no such track record, which means that the Starbucks could still continue to prosper by offering premium meals and beverages, but it will be in the different target market.
Such actions of the company could also have a negative impact on brand positioning since this will create choice overload. Indeed, a recent survey found that the customers are most likely to make a purchase when they are offered a choice of six items. However, thirty-six becomes way too many. At the same time, these target customers are more satisfied by their selection from fewer alternatives. Thus, when the Starbucks offers its target customers too many options, they could have difficulties in making their decisions. As a result, it could decrease overall customer satisfaction, which will have a negative impact on the profitability of the company. Overall, the best approach that the company could take is by limiting its offerings to a certain extent, but changing them up from time to time. Ultimately, they should keep the items that are in most demand and remove the ones that are least popular and have lower customer satisfaction. In other words, by making the menus more thorough, the company could still keep its customers and offer them more options based on their needs, tested by the company in advance. However, there is one more concern, which is the supply chain that will become more complicated and timely that is not favorable for the company and its target customers. For this reason, it makes sense to consider implementing additional training on logistics, inventory, meals and beverages and performance for the employees in order to manage the supply chain based on the newly established marketing strategies of the company.
Overall, the issues that the company could face in the future could be considered with respect to the growth opportunities for the business of the Starbucks Company. In particular, the menu expansion strategy is the major element for the future growth of Starbucks. In addition, adding more items to the menu does not mean that it will automatically increase the number of orders and lead to higher customer satisfaction. In any case, the coffeehouse industry is maturing, which could pose risks for the company in terms of decreasing the well-established brand of the global coffee shop. Nevertheless, it is still possible to achieve growth in the existing market if Starbucks responds rapidly to the feedback of the target customers, especially when it is negative. At the same time, it makes sense to consider the investment initiatives and their return in the short-term and long-term implementation of the expansion strategy.
The opportunities of the Starbucks Company refer to its strength in terms of the existing market position and ways to take advantage of it. It should continue delivering the products and services of the highest quality. The executives should also pay closer attention to the operations of the Human Resource Management, including the perceptions of the goodwill among the target customers, which could be referred to with respect to social responsibility initiatives. At the same time, it makes sense to take advantage of the existing product mix by using innovative technologies for its promotion in the target market. As a result, the company will be able to maintain its loyal customer base. The other opportunity for the company is to consider expanding into the emerging markets, including the implications of the retail operations. It also includes the advancement of the existing technologies and creation of new distribution channels that will provide a better extension of the Starbucks brand. However, the executives should be aware of the increased competition in the coffeehouse industry, in particular in regards to the volatility of the pricing policies in the international market. At the same time, the executives should pay attention to developed countries, their economy and saturation of their target markets. Finally, it makes sense to always test the preferences of the target customers since their tastes could change with respect to their lifestyles. It should also be considered in advance and followed based on both positive and negative feedback of the target customers based on their choices of both meals and beverages all over the globe.
Since the End of the Case, What has the Company done to solve these Issues?
Explain whether these Actions are Consistent with Company Strategy, or if they represent a Change in the Strategy
Regarding the case, the Starbucks is in the process of solving the addressed issues. In fact, the Starbucks Company has around seven strategies that are being used in order to increase the management and overall organization of the business with a special attention on the management procedures. For example, it has started using a reward program and has improved its international expansion strategy. Also, it makes sense to increase the connection with the target customers and continue to increase the quality of both coffee and food offerings in all the subsidiaries all over the world. It is also important to acknowledge that due to the chosen marketing strategy, the number of active members of the Starbucks rewards program grew from 3.6 million in 2011 to 8 million in 2014, an increase of more than 200% in three fiscal years.
In more detail, the Starbucks Reward Eco System takes advantage of the Starbucks Reward cards that are available at the checkout counter. The target customers can also register online in order to take advantage of purchasing Starbucks products, and accumulate points in the form of stars in the process. Based on this program, the target customers are rewarded for purchasing particular goods. They can also redeem the gained stars at the Starbucks Company, including the La Boulange, Teavana, and Evolution Fresh spaces. A convenient feature is the ability to synchronize the card account to the smartphone application. Finally, the target customers could consider investing in the stocks of the company based on the volatility of its stock prices.
Another strategy in use is called the segmentation initiative that is managed to attract a broader range of the target customers all over the world. It achieves this by addressing the multiple of the customers’ target segments. This chosen strategy has yet to be considered in terms of its value and overall benefit for the company. Compared to the other reward programs such as those offered by Dunkin Brands and McDonalds, it is not certain whether this strategy is effective for coping with the increased competition in the target coffee and snacks industry. Overall, the company and its major strategy should be aimed at selling the specialty coffee and high quality food with a stronger commitment. In fact, the segmentation strategy of the Starbucks Company is the response of the company to the similar programs of both McDonalds and Dunkin Brands.
However, the executives should be careful with approaching the segmentation strategy since the company could have some negative effect on its brand image, which is simultaneously the greatest competitive advantage of the company in the target market. In this case, if the company offers its specialty coffee at the discounted price, there could be a price war between the Dunkin Brands and McDonalds. According to the position of the marketing experts, this would not be favorable for any of the parties involved. Instead, the Starbucks executives should take advantage of the elaboration of the discounted techniques and apply better customer reward techniques. This will not have a negative impact on the prices of the Starbucks Company and will help it to avoid any potential price wars. As a result of the recommended marketing strategy, the Starbucks could escape from affecting its brand reputation as well as eliminate the problems with the experience of the bond customers have with Starbucks.
In addition, the use of the reward program could be perceived from the basis of encouraging customers to visit the coffee houses more frequently. As a final point, it is important to consider the marketing strategy of the Starbucks Company with respect to the increase of the quality of products and customer care services. It makes a great sense to get closer to the target customers by matching their business and personal lifestyles. It is also important to avoid the price war between the brands of the companies. Instead, it will make more sense to consider the values and benefits of cutting down costs on the delivery of products and organizational costs. At the same time, it is important to shorten the organizational costs and customer lines at the Starbucks stores. Simultaneously, it is important to increase the base traffic across the coffee stores all over the place. As a result, the Starbucks Company will be in a more favorable position due to the enhanced coffee chain across the globe.
Appendix: Starbucks Company’s Income Statement and Balance Sheet
Selected Financial Data
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